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Europe

EU integration greatly influences policy-making at the national level, and the EU itself is a major actor on the world economic stage. Most of the conditions governing the economic and business environment for European companies and consumers - especially in respect of the financial markets - are decided at the European level. For this reason, Deutsche Bank Research analyses and appraises the latest developments in the EU and EMU. European banks and financial markets are a major focus in this regard.

153 (41-50)
March 2, 2017
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The European banking industry suffered a significant setback in 2016. Revenues declined across the board, cost reductions were unable to keep pace and loan loss provisions rose. As a result, net income fell by almost half. Banks resorted to aggressive de-risking, but a shrinking equity base meant that capital and leverage ratios stagnated for the first time since the financial crisis. By contrast, US banks continued to grow and set a new record in terms of nominal profits, widening the gap to their European peers. [more]
41
February 22, 2017
Region:
The headline inflation rates, which have increased substantially in recent months, have rekindled the debate surrounding the ECB's bond-buying programme. German producer prices have also risen sharply in recent times. In December 2016, the prices of metal (up by 5% on December 2015) and energy (up by 10%) increased particularly sharply. Nevertheless, the remaining inputs (weighting: 83.6%) continued to show no inflationary pressure at all. [more]
42
February 21, 2017
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Analyst:
Securitisation markets have returned to policymakers’ attention recently, only this time as a hoped-for panacea to anaemic lending in Europe rather than a culprit for the financial crisis. To date, the focus is largely on true-sale securitisation. Yet synthetic securitisation has notable potential as well, especially for SME lending. Synthetic securitisation saw mixed trends in recent years. 1) Complex arbitrage deals have almost disappeared. 2) Balance sheet synthetic deals have surged to an issuance volume of EUR 94 bn in 2016. Transactions have become mostly private, yet are now much less complex and of robust asset quality. A firm inclusion of balance sheet deals in the evolving framework for simple, transparent and standardised (STS) securitisations would be sensible and could well contribute to a recovery in lending in Europe. [more]
43
January 24, 2017
Region:
It is hard to overstate the importance of trade policy for Europe. The EU28 is the largest trading bloc, the top trading partner for about 80 countries worldwide and ranks 1st for in- and outbound investment. The EU’s free trade agreements (FTAs) vary substantially, depending on partners and policy priorities. “New generation trade agreements” go beyond traditional tariff reductions, including issues like services trade, intellectual property or investment. EU agreements to foster trade (and investment), however, have sparked mixed feelings more recently given the backlash against globalisation as well as EU-internal controversies over the power to strike such deals. Yet, the EU’s ability to conclude trade deals is also contingent on political support. Rising scepticism about globalisation means, that (potential) distributional effects of FTAs and their (potential) interaction with national legislation, is going to feature more prominently throughout negotiations and in the public debate. [more]
44
December 19, 2016
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Analyst:
Regulatory reforms have already reshaped derivatives trading in Europe. The upcoming potential shift towards central clearing for some derivatives classes and the availability of CCPs globally will likely result in some fragmentation in derivatives trading. FX derivatives markets are providing first insights into this: Asia already makes up 26% of global FX derivative trading volumes in 2016. As the Asian exposures of European firms and Asian financial sector grow, hedging currency risks in local Asian markets seem to be becoming common practice. This may fuel the ongoing decentralisation of global derivatives trading and give rise to higher costs for market participants. [more]
45
December 6, 2016
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Analyst:
Inequality is dominating the political debate in various countries still characterised by sluggish economic recovery and high unemployment even several years after the financial crisis. In this note we look at trends, drivers and solutions. Four points stand out from the trends. First, global income inequality has increased over the last three decades. Second, the integration of the EM into the global economy has allowed aggregate income levels to converge towards AE levels, lifting millions out of poverty. Third, the AE have been better able to control income inequality via redistribution. Fourth, aggregates can be deceptive. Rising income inequality is associated with globalisation, technological change and migration. At the same time they have had an undeniably positive impact on aggregate income. The policy dilemma is in resolving the tension between the increase in income and its unfair distribution. [more]
46
November 18, 2016
Region:
European banking sector results improved in the third quarter after a weak first half of the year. Still, all revenue components registered year-over-year declines, only partly offset by falling costs and lower loan losses. While credit growth remains nearly non-existent, deposit growth has picked up further momentum and is now at its strongest since 2009. This comes despite record-low borrowing costs for customers and deposit rates virtually at zero. Going forward, following the US election, one of the biggest unknowns is the future direction of prudential regulation at the global level, where changes could have a material impact on European banks. [more]
48
November 1, 2016
Region:
While European central bankers commend themselves for the scale and originality of monetary policy since 2012, this self-praise is increasingly unwarranted. The reality is that since Mr Draghi’s infamous “whatever it takes” speech in 2012, the eurozone has delivered barely any growth, the worst labour market performance among industrial countries, unsustainable debt levels, and inflation far below the central bank’s own target. While the positive case for European Central Bank intervention is weak at best, the negative repercussions are becoming overwhelming. This paper outlines the five darker sides to current monetary policy. [more]
50
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